From 1st July 2021, companies have needed to contribute a minimum of 10 per cent towards the pay of furloughed staff - with the Government topping up the remaining 70 per cent. In August, company payments will increase again - to 20 per cent, with the Government paying 60 per cent.
Michael Hibbs - Employment Law Expert and Partner at Shakespeare Martineau - suggests that, should companies take the difficult decision to make redundancies, there are several legal issues that could arise. These include giving staff full notice and paying them 100 per cent pay during that time; having individual consultations with staff and where twenty or more redundancies are involved, collective consultation is needed - and employees are entitled to be paid in full when looking to take annual leave.
He added:
“The next few months are going to see the most significant changes to the furlough scheme since it was reintroduced in November. As a result, we could see staff being un-furloughed and being placed at risk of redundancy. Therefore, it is critical that employers and employees both understand their rights when it comes to the scheme, including those surrounding redundancy and holiday pay entitlements.”
However, as businesses begin to plan for the next few months, labour market economist at the CIPD - John Boys - states that HR professionals “should concentrate on welcoming back furloughed workers - and taking a holistic approach to health, safety and wellbeing”.
He added that the 70 per cent/10 per cent split over the wage payments for staff on furlough “looks positively generous” when compared to previous payments and that he thought it made sense to avoid redundancies, if possible, as the average cost of a redundancy was £11,125 - plus recruitment costs of an average of £2,000 per employee.
John Boys went on to acknowledge that the furlough scheme had meant that firms could retain jobs without risk. But he said:
“As they are asked to share the costs, they will inevitably shed some of the jobs that are unviable.”
Julie Grabham - Director of JG HR Solutions - was looking past the present changes to 30th September, when the furlough scheme is expected to end. She commented that firms needed to start considering other ways to restructure jobs, such as Introducing job shares and increasing working hours. She said that reducing the use of furlough and using holiday entitlement can all help ease pressure on the business.
Alan Price - CEO of Bright HR - stated that any companies who were considering introducing short-time work needed to agree this with their employees, otherwise they risked breaching staff contracts.
He said:
“Employees cannot be forced to reduce their hours, but communicating with them about its necessity, if the company is under financial strain, may persuade them into forming an agreement.”
Keely Rushmore - Employment Partner at Keystone Law - was rather pessimistic about the burden that the new salary contribution requirement could be on employers attempting to stay afloat. She commented on the problem faced by businesses that could not fully operate until 19th July, saying:
“Being unable to open or at least operate fully for an additional four weeks but needing to pay furloughed staff 10 per cent of wages during that time could mean the difference between a business surviving or going under”.
She went on to say that it was crucial companies acted quickly and assessed what financial assistance was open to them, suggesting that HR professionals may need to consider whether staff cuts needed to be made through options such as pay cuts, amended working hours and redundancies.
She warned, though:
“Reductions in workforce and adverse changes in terms and conditions could have serious consequences – either because the business will not have enough staff to meet customer demand, or because they have a workforce that is too demoralised to work to its full potential”.
